The dollar inched up on Wednesday against a basket of currencies as traders awaited the release of the Federal Reserve's minutes on its June policy meeting which may hold more clues on its plan to possibly reduce its balance sheet later this year. The yen rose briefly on safe-haven demand after North Korea said on Wednesday it conducted a test of a newly developed intercontinental ballistic missile (ICBM) that can carry a large nuclear warhead.
A sharp pullback in oil prices bogged down the Canadian dollar and other currencies of countries whose economies are reliant on commodity exports. "Traders are looking for more clarity on the Fed's strategy for the rest of the year," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California. The dollar index was up 0.18 percent at 96.388 after touching a one-week high earlier on Wednesday. The euro was down 0.12 percent at $1.1329, retreating further from its highest levels in over a year reached last week.
The greenback hit a seven-week high against the yen at 113.68 yen before fading to 113.27 yen, little changed on the day. The dollar slipped below 113 yen in overnight trading in the wake of Pyongyang's announcement on its latest missile launch. US financial markets were closed on Tuesday for the July Fourth holiday. In addition to more details on how the Fed would reduce bond reinvestments to shrink its $4.5 trillion balance sheet, traders are awaiting hints on the timing on the next interest rate increase even as inflation has softened in recent months.
The Fed will release the record of its June 13-14 policy meeting at 2 p.m. (1800 GMT). A 3 percent drop in oil prices hurt the Canadian , Australian, New Zealand dollars and other commodity-sensitive currencies. The Canadian dollar fell 0.5 percent at C$1.3002 per dollar after hitting C$1.2912 on Tuesday, which was its strongest against the greenback since Sept 9.